There’s a quiet but powerful shift happening in the world of commercial banking—one that even businesses themselves may not fully notice. Traditional banks are being steadily replaced in day-to-day operations by modern, embedded financial tools. This movement marks a significant moment in Commercial Banking Digital Transformation, and it’s far more than a passing trend—it’s a wake-up call.
The real question now is: how can banks respond before they’re left behind?
The Threat Banks Can’t Ignore
From payroll services to expense tracking and invoicing, businesses are increasingly relying on fintech platforms like Brex, Ramp, Mercury, and Shopify. These tools don’t just offer better user experiences—they’re becoming the default financial touchpoints for small and midsize businesses.
That shift creates a critical threat: traditional banks are being edged out of relevance in the business operating system.
But where there’s disruption, there’s opportunity.
Banks that understand this change—and act—can regain ground by rethinking how they land and expand commercial relationships through digital transformation.
Discovery Through Collaboration
Recent work between community banks and fintechs has revealed surprising insights into the pain points felt on both sides of the relationship.
On the bank’s end, fragmented systems and outdated processes make it hard to deliver consistent service. Even for bankers, toggling between software tools, chasing down data, and managing manual tasks has become a drain.
Business customers, meanwhile, face confusing interfaces, limited product integration, and a lack of digital convenience. It’s no wonder they’re turning to fintechs.
By bringing banks and fintech startups into collaborative programs—like concept labs that enable deeper discovery—banks can better understand the root of their operational challenges and how technology can fill the gaps.
Why Experience Matters—For Both Banker and Business
The digital customer experience often gets all the attention. But there’s a deeper layer: the banker experience.
If your commercial relationship managers are struggling to navigate internal systems or access the information they need, it affects their ability to serve clients and grow accounts.
The solution? Unified platforms that serve both customer-facing and internal teams. Modern solutions aren’t just about flashy interfaces—they’re about streamlining operations, reducing friction, and empowering every touchpoint of the bank.
When both sides of the relationship are supported digitally, the result is better service, stronger relationships, and a clearer competitive edge.
Three Strategic Paths for Banks
To stay relevant and compete effectively, banks must rethink their commercial banking strategies. Recent research identifies three core paths:
1. Technology Modernization
The most straightforward approach is upgrading internal infrastructure. That includes:
- Building API-enabled middleware to overcome core limitations
- Implementing modern onboarding and KYC processes
- Cleaning and connecting customer data for better intelligence
- Creating flexible digital tools for deposit, credit, and treasury management
This route can be a heavy lift. But with executive buy-in, a clear roadmap, and the right partners, it’s possible to modernize without rebuilding from scratch.
The key is to avoid “Frankenstack” technology—layers of disconnected tools that complicate more than they solve. First-principles thinking, focusing on the real needs of users, can guide smarter decisions.
2. Strategic Partnerships
Not every capability has to be built in-house. Strategic partnerships with fintechs allow banks to rapidly expand capabilities without major infrastructure overhauls.
But partnerships only work when both sides are aligned. Banks need to ask:
- Is this a vendor relationship or a true partnership?
- Do we have a plan to fully integrate and operationalize this solution?
- Who owns the ongoing success of the initiative?
Often, technology projects fail not because the product is bad, but because no one owns the results after launch. Banks need internal product champions—whether they’re called product managers or not—who drive adoption, track performance, and evolve the solution over time.
3. Vertical Specialization
Some of the strongest moves banks can make are industry-specific. Fintechs like Toast and Square are gaining traction by tailoring solutions to restaurants, retailers, and other niche segments.
Banks can do the same—building targeted offerings for verticals like legal services, agriculture, or commercial real estate. In many cases, banks already have a foothold in these industries but haven’t packaged their products in a way that makes it clear.
One bank, for example, built a specialized IOLTA account package for law firms. They didn’t need complex new software to do it—just a deep understanding of their customers and a willingness to meet their unique needs.
Understanding Internal Complexity
Digital transformation doesn’t just mean adding new tech—it requires understanding the complexity within the bank.
Data issues, disconnected systems, and legacy processes all stand in the way. Many banks aren’t even aware of how fragmented their operations are until they try to integrate a new tool.
Cleaning up the internal house is an essential first step. Without it, even the best fintech solutions can fail to deliver results.
Moving Beyond Geography
Here’s where things get exciting: banks that embrace digital transformation and vertical specialization aren’t limited to their physical footprint anymore.
With the right strategy, a community bank can serve a national customer base in its chosen niche. Digital tools allow for expansion beyond ZIP codes—if the experience and value proposition are compelling enough.
Where to Start: First Steps for Banks
For banks looking to respond to these emerging threats and opportunities, here’s where to begin:
- Know Your Customer Base
Start by analyzing the industries and customer segments you already serve well. Look for common pain points and unmet needs. - Repackage What You Already Do
You may already offer valuable services—it’s just not packaged in a way that stands out. Create bundled offerings tailored to the real workflows of your clients. - Start Small and Learn Fast
Not every move needs to be a 5-year initiative. Pilot a vertical focus. Test a new fintech partnership. Launch a sidecar app. Prove value quickly and build from there. - Invest in Ownership and Support
Whether it’s a product owner, a tech lead, or a cross-functional team, ensure someone owns the outcome and has the resources to sustain it. - Build Trust Through Action
Trust doesn’t just come from handshakes—it comes from delivering on promises. Technology that works, data that’s accurate, and processes that are smooth all reinforce trust.
The Clock Is Ticking
The invisible heist is already underway. Fintechs are embedding themselves in the daily operations of businesses, and they’re not stopping.
But the playbook is being rewritten. Banks that act now—by modernizing technology, partnering smartly, and focusing on vertical opportunities—can not only survive this shift but come out stronger.
The future of commercial banking is digital, specialized, and relationship-driven. The banks that embrace that reality will lead the next chapter of financial services.
